SK Square. Yonhap News
SK Square (402340) shares, which topped 2 million won in June, have fallen to less than half their peak in just a few months. Brokerages are now lowering their target prices for the holding company one after another as they trim profitability forecasts for SK hynix (000660), drawing attention to where the stock heads next.
From 2.18 Million Won to the 700,000-Won Range
According to the Korea Exchange, SK Square closed at 1.041 million won on the 4th, up 60,000 won, or 6.12%, from the previous session. That is still less than half its 52-week high of 2.189 million won, recorded on June 23. The stock plunged to as low as 770,000 won during trading on July 30 before recovering above 1 million won the following day, but volatility continued afterward. On the 3rd, it slid to 947,000 won intraday, falling back below the 1 million won mark.
SK Square is an investment holding company that was spun off from SK Telecom (017670) and listed in 2021, and it is the largest shareholder of SK hynix. Because its stake in SK hynix accounts for an overwhelming share of its corporate value, the stock is highly sensitive to moves in SK hynix shares.
SK Square shares started this year in the 200,000-won range and climbed steeply. SK hynix’s high-bandwidth memory (HBM) business drew attention amid the AI boom, while SK Square’s own shareholder return policies, including share buybacks and cancellations, also lifted the stock.
The shares then corrected quickly as concerns emerged over SK hynix’s profitability. Demand for AI memory remains solid, but analysts say the high margins SK hynix has enjoyed could narrow as Samsung Electronics (005930) enters the next-generation HBM market.
HBM Margin Seen Falling From 80% to 60%
LS Securities (078020) maintained its “buy” rating on SK hynix on the 31st of last month but sharply cut its target price to 2.4 million won from 3.3 million won.
The key reason for the cut was not a slowdown in HBM demand but a change in its outlook for excess profitability. LS Securities had initially expected SK hynix’s HBM operating margin to rise to about 80% next year, but after a recent industry review it lowered that forecast to about 60%, similar to this year’s level.
Jung Woo-sung, an analyst at LS Securities, said the premium tied to supplier concentration could ease somewhat as Samsung Electronics enters the HBM4 market. If the HBM operating margin were to climb to 80%, Nvidia would have to raise product prices further to maintain a gross margin of about 75%, which could increase the burden of server investment for Big Tech firms, he explained.
The brokerage does not see the HBM market itself as having turned, however. LS Securities kept a positive view on SK hynix’s HBM shipments and medium- to long-term demand, saying the key variable for the stock will be how well the company defends its technological edge and its share within major customers in next-generation products.
SK Square Target Cut to 2.28 Million Won From 2.7 Million Won
Earlier, NH Investment & Securities (005940) lowered its target price for SK Square by about 15% to 2.28 million won from 2.7 million won on the 18th of last month. The cut reflected the recent correction in SK hynix shares, with the brokerage raising the discount to SK Square’s net asset value (NAV) to 40% from 25%.
NH Investment & Securities calculated SK Square’s corporate value by combining about 497 trillion won in listed holdings, including SK hynix and Dreamus Company, with about 4 trillion won in unlisted holdings such as TMAP Mobility, FSK and CS T1. Applying the 40% discount produced a per-share value of 2,280,705 won.
The brokerage also said the recent correction could end and give way to a rebound. AI infrastructure demand remains solid given the growth of neocloud companies, it said, and investor sentiment across the semiconductor sector could recover if SK hynix discloses its shareholder return policy.
If SK hynix’s dividend per share rises to 13,600 won, dividend income for SK Square, its largest shareholder, is estimated at about 2 trillion won. SK Square itself paid a dividend of 1,500 won per share, or 204.3 billion won in total, in June, and plans share buybacks worth 40 billion won this year and 70 billion won next year.
Ultimately, analysts say, whether SK Square rebounds also depends on SK hynix. Even if AI and HBM demand keep growing, the pace of Samsung Electronics’ catch-up, SK hynix’s profitability and its competitiveness in next-generation HBM are expected to be the key variables determining SK Square’s share price.